Delavan City Council to consider developers agreement for downtown hotel

The Delavan House Hotel has been sitting empty for years in the hopes of redevelopment.

DELAVAN—A key piece of Delavan's downtown redevelopment may finally be in place.

Delavan House Hotel, which has remained vacant for nearly a decade, has been sold, and its new owner, Sean Patel, hopes to have the business open by May 1.

Patel, a Chicago-based businessman, is part of a family group that owns the Super 8 in Delavan and a number of other hotels in southern Wisconsin and Northern Illinois.

At a meeting Tuesday night, the Delavan City Council will consider a developer's agreement that would provide up to $250,000 for fašade improvements and renovations to the main floor of the building. The agreement also could provide tax reimbursements to the hotel's owner.

The goal is to help the developer succeed and to translate that success to the rest of downtown, Delavan City Administrator Denise Pieroni said.

HISTORY AND HOPES

The hotel at 215 E. Walworth Street has been vacant since 2004. The five-story, 60-room, 41,000-square-foot building is at the center of downtown, and city officials and planners have identified it as a crucial part of redevelopment efforts.

Earlier this year, the city hired Vandewalle & Associates to create a strategic plan for the downtown.

The plan referred to the hotel as the “largest building and highest profile property in the downtown.”

It's vacancy was a “barrier to economy grown and vibrancy” and bringing the hotel back to an “economically productive use would be an enormous boost to the district," the plan reads.

Downtown businesses and residents identified the hotel as “high priority” in redevelopment efforts, according to the plan.

The previous owners of the building, Midwest Hotels, lost it to foreclosure in 2009.

In July 2012, the Stonecrest Income & Opportunity group bought the building out of foreclosure.

Last month, Best Hospitality bought the building. The company is made up of Patel and three other family members.

Patel said he saw the building as a “good opportunity.”

He plans to do more than $1.5 million in renovations on the first phase of the project.

FINANCIAL INCENTIVES

Patel already has been through the downtown design review process that approved redoing the front of the building in brown and tan.

Tonight, the council will consider a two-part developer's agreement with Best Hospitality for the hotel.

The city is in the process of applying for a grant from the Wisconsin Economic Development Corporation of up to $250,000.

The money, which requires a 75 percent match investment, could be used to reimburse the developer for project costs related to fašade improvements or renovations to the main floor of the building, according to a memo from Pieroni.

The money would be in the form of a loan. However, payments would be waived each year the hotel, restaurant and retail space on the building's main floor were in use, the memo said.

The second part of the agreement would allow the developer to be eligible for reimbursement of taxes generated from new development.

The hotel is in the downtown incremental financing district. A TIF is a financing tool that allows municipalities to attract private investment through property improvements and other incentives.

The cost of those improvements and incentives are charged to the district. As the district's property values rise because of new investment, the increase in property taxes is used to repay the municipality's costs.

In this case, the developer would have to run the hotel year round, invest a minimum of $1 million in the building in the next two years and use a percentage of the first-floor space for a restaurant and other retail, according to the memo.

In return, the developer could be reimbursed up to 80 percent of new taxes generated from the hotel. The amount would depend on the overall financial health of the TIF district.

The goal of the developer's agreement is to create positive partnership between the developer and the city, Pieroni said.

The success of the hotel is an important part of the success of downtown, Pieroni said.

“We have to do what we can to make it financially feasible,” she said.